An investment will pay you $47,000 in 11 years. If the appropriate discount rate is 7.4 percent compounded daily, what is the present value? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Solution Description

Explanation:

We simply need to find the PV of a lump sum using the equation:

PV = FV / (1 + r)t

It is important to note that compounding occurs daily. To account for this, we will divide the interest rate by 365 (the number of days in a year, ignoring leap year), and multiply the number of periods by 365. Doing so, we get: